Thursday, July 2, 1998 Published at 21:37 GMT 22:37 UKWorldSwiss banks face sanctionsA gold bar made by the Nazis out of gold seized from Jews during the HolocaustA committee representing more than 800 state and local government finance officers in the United States says it will impose sanctions on Swiss banks suspected of harbouring the assets of victims of the Nazi holocaust.

The State Treasurer in California, which has about $2bn on deposit in Swiss banks, said his state would announce some form of action on Thursday, but did not give details. Other sanctions are expected to come into effect in stages.

The US federal government is opposed to such sanctions.

Switzerland's two largest banks, Credit Suisse and UBS, expressed outrage at the decision.

The banks issued a statement calling the sanctions unwarranted, counter-productive, unconstitutional and illegal. They said the banks would not be pressured into paying exorbitant and unwarranted sums of money that they claimed bore no relation to the facts.

The Swiss government is to lodge a complaint with the US

The Swiss Government has said it will file a complaint with the US Government, arguing that the sanctions violate global trade rules.

The Swiss banks have so far failed to reach agreement with groups representing the relatives of holocaust victims over the question of compensation.

Jewish organisations are seeking $1.5bn to cover all claims by relatives and descendants of holocaust victims, who say the banks retained family assets.

The banks however have offered only $600m.

American finance officials have been threatening to impose sanctions on Swiss banks for several months, but they postponed taking action until the banks had considered the $1.5bn settlement proposed by the Jewish groups.

The decision by the committee of finance officials to go ahead with the action came after the World Jewish Congress dropped its objection to sanctions.